Local Perspective: Surprise is not for real estate investment

Friday

Oct 4, 2013 at 12:01 AMOct 4, 2013 at 11:03 AM

Mike Chesser

Here’s the setting: A young couple want to live in a rural setting. They buy 10 acres in the year 2000, build a house on their property, and expect that, with more population and more urban expansion, their investment will one day have been a great, forward-thinking idea that grows in value.

I’d love to be able to write a funny article, or sometimes even a fun article, about investments in real estate. Unfortunately, fun is not always practical, even if it were possible. Therefore, I usually settle for “helpful.” Today’s article is that, although only for the several times in the life of a broker or salesman that it will ever apply.

Last month I talked in this space about the duty of the closing agent, working with the surveyor, to find and identify all easements that affect property at the time it is closed. That subject brought a question about who has the duty to maintain an easement when we know one exists. The circumstance was unusual, but common enough that realtors and land dealers should be aware of its consequence.

Until subdivision ordinances became common (in Okaloosa County in 1974), some developers sold tracts of land by reference to an unrecorded map that showed the property. The counties in Florida did not require the access ways shown on the map to be dedicated to the public, or even to the owners within the subdivision. The owners got easements, even if only because the law says they have access by implication. But those easements were sometimes shown on the map but not dedicated to the county, city, or to the owners for continuous maintenance. The developer may have hoped that sooner or later the government would take the property into its road system and provide for its maintenance. Sometimes that happened. Sometimes it did not.

There are many reasons a government might say, “No thank you,” if one of these owners were to ask the government to take over maintenance. The most frequent is that the roads do not meet the required standards for width. Another is the reality that the developer has already made his money by selling the lots to sometimes unsuspecting buyers, leaving the county or city with the expense of providing roads, sewer, drainage, and maintenance.

An example is the developer who owns a tract of land and divides it, most often in rural areas. A dirt road may be perfectly acceptable in 1950 if the lots are several acres in size and the expected use could be farming, or merely investment.

But fast forward.

Today, a 10-acre parcel on which a nice house was built just a couple of years ago, lies at the end of a mile-long dirt road. The parcels before it on the same road were sold in smaller parcels, such that there are now many lots, some with mobile homes, and some with houses, and some remain vacant. There is a creek and surrounding wetlands cutting across the road about halfway along. The road had a galvanized culvert placed across it that is now almost 65 years old and clearly won’t be serviceable for many more years. Occasionally, a neighbor grades the road just to keep it passable.

Now the county has property the appraised value of which is far less than it would be if served by decent roads. Because of federal mortgage regulations, none of these owners can sell their property for a fair value because property cannot be financed without a functional road and some sort of provision for maintenance. A maintenance agreement cannot be negotiated because some owners have small lots, worth less than others. Some live before the wetlands and don’t care whether the culvert is ever replaced. Some have no desire to sell, live closer to the public road, and don’t want to share in the cost of solving a problem they don’t consider to affect them. Like the federal Congress, for reasons different to each of them, these owners are stalemated.

In Florida, believe it or not, there is no common law right for any owner to look to his neighbor, even one who uses the road daily, to help with its cost. Instead, while each owner of an easement has a legal right to do whatever is necessary to make it useable, each also has a legal right to do nothing.

This situation benefits no one. There are no good answers, and therefore the laws in all jurisdictions do not permit the example if the subdivision were developed today. But we are dealing often with older subdivisions, developed before those laws. Sometimes the county can justify the expense of paving the roads, if enough width exists to build a road to county standards. Sometimes, even assuming the appraisal values increase for tax purposes, the county could never recover the cost from the revenue expected from the property if it pays the cost of building new roads in this subdivision. If the county were to build these roads it would be doing so with other people’s money, to benefit a few owners.

Okaloosa, and some other counties, have imposed a municipal services benefit unit (MSBU) on the property to be served by a specific, necessary, improvement. An example is Kell-Aire gardens, in Destin (sewer and drainage for lots otherwise legally unusable). These districts generally require the owners to come together to request the county (or city) to provide a needed improvement.

All this to say to Realtors and those who will buy or deal in land: Once you have identified the easements that serve a property, identify also the legal duty to maintain them. The maintenance stalemate described in this article can ruin your client’s otherwise wise investment dreams.